PREM BAHADUR MAHARJAN
Chairman
Rastriya Beema Sansthan

What is your company’s stake in the aviation insurance market?

The amount of insurance is calculated in foreign currency. We own around USD 2 million business which constitutes 30 to 40 per cent of the total aviation insurance business. We are the only insurance company insuring big aircraft including jet planes. We have insured the Jet planes of the national flag carrier, Nepal Airlines, and BB Airways lately. We have succeeded in acquiring the largest proportion of insurance share in the market because national airlines is insured with us.   

Is it true that the insurance companies have not been able to make profits from aviation insurance? Why?

I don’t agree with this.  In our case, we feel that there is some harsh competition including in the premium rates. And particularly in the private airlines sector, we have witnessed a number of air crashes. That might have contributed to the loss in the overall aviation insurance business but it is not the case of Beema Sansthan. We have not gone through such loss. Nor  have our clients faced such air crashes.

Some insurance companies are trying to form a pool to collectively handle the claims on aviation insurance. When could we see such a pool?

I have also heard about it. I guess the practice of collectively handling the aviation insurance claims is yet to materialize. It would be good if such a pool is formed. It will help prevent unhealthy competition.

What future do you see for aviation insurance business in Nepal?

I see a lot of potential for this business.  The aviation market has grown in Nepal over the years and with it, the aviation insurance business, too, has grown. The other big reason is that Nepal is promoting tourism by organizing many events. This has increased the number of air passengers to Nepal and thus helped the aviation insurance in the country.

Almost whatever the insurance companies earn from the aviation segment goes to the reinsurance companies abroad. Some are even said to be making losses in the aviation segment. It is said that the companies know that they are not going to make profits from the aviation segment. But they do aviation insurance just to show high

insurance premium collection. What do you say?

In a way, it is true. Since we don’t have a strong financial institution that can cover the aviation insurance, we depend on foreign reinsurance companies. Though the percentage of commission from premium collection that we collect seems minimal, we are able to sustain the operation. Though the commission might be less in comparison to the bigger amount of insurance premium; we have other indirect benefits as well. It is because we have to reinsure  with very reliable reinsurance companies recognized internationally. There are very few reliable reinsurance companies. Beema Sansthan has found a re-insurer based in the United Kingdom.

What do you expect from the Beema Samiti or the government for that matter to facilitate the aviation insurance business in the country?  

There is unhealthy competition among the insurance companies at present. They tend to take the aviation insurance business at low rates ignoring the risk factors. The situation is such that some companies might collapse if something bad happens to the airlines they have insured. Moreover, I have heard that some insurance companies are even unable to pay out the claims. Beema Samiti, being the regulatory body, can set some standards to avoid such kind of unhealthy competition. Beema Sansthan is a government-owned institution. So, it does not need to jump into this unhealthy competition. Though aviation insurance is growing, almost all the premium collected here goes abroad. We get only a fraction of it as commissions. I think this is the time that Beema Samiti should form a government-owned re-insurance company in Nepal. It will help us to stop or decrease the amount of money going outside the country.

What are the key challenges and issues facing the aviation insurance industry in Nepal?

As I already mentioned, the first challenge is unhealthy competition among some insurance companies. The risk factor is also growing and it is making premiums costlier. We have witnessed many air crashes in a quite short period of time. It is not only about insurance, it is also about the safety of the people.

What needs to be done to address these challenges?

There has to be a strict monitoring mechanism for air traffic discipline. People involved in the aviation business should be given safety education. Pilots should also be alerted not to take any sort of risks.

Moreover, unhealthy competition among the insurance companies should be stopped. And it could be managed since there are very limited insurance companies in the aviation sector. Furthermore, the government should try to establish reinsurance companies here in Nepal itself.

The country’s first-ever aviation insurance summit was organized in the capital recently. How did you find this summit?

From educational point of view, the summit was quite fruitful to the people involved in the aviation insurance sector. It was successful in raising the issues related to the risk factors in the aviation insurance and about the premiums that are in practice. Such summits are helpful in making people aware about the things happening in the aviation insurance market. I expect such events to continue.